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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






2. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






3. The mechanism for combining production resources - with existing technology - into finished goods and services






4. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






5. The total quantity - or total output of a good produced at each quantity of labor employed






6. Demand for a resource like labor is derived from the demand for the goods produced by the resource






7. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






8. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






9. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






10. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






11. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






12. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






13. Entry (or exit) of firms does not shift the cost curves of firms in the industry






14. The most desirable alternative given up as the result of a decision






15. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






16. The sum of consumer surplus and producer surplus






17. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






18. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






19. The price of a good measured in units of currency






20. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






21. Ei = (%dQd good X)/(%d Income)






22. Models where firms agree to mutually improve their situation






23. Occurs when LRAC is constant over a variety of plant sizes






24. Ed < 1






25. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






26. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






27. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






28. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






29. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






30. Costs that change with the level of output. If output is zero - so are TVCs.






31. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






32. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






33. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






34. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






35. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






36. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






37. A good for which higher income decreases demand






38. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






39. Ed = 0 - no response to price change






40. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






41. When firms focus their resources on production of goods for which they have comparative advantage






42. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






43. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






44. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






45. The ability to set the price above the perfectly competitive level






46. ATC = TC/Q = AFC + AVC






47. Es = (%dQs) / (%dPrice)






48. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






49. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






50. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary